Test bank International Finance MCQ wordChap 10.docx

Test bank International Finance MCQ wordChap 10.docx

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TestbankInternationalFinanceMCQwordChap10

FundamentalsofMultinationalFinance,3e（Moffett）

Chapter10

OperatingExposure

10.1

MultipleChoiceandTrue/FalseQuestions

1）

Anothernameforoperatingexposureis________exposure.

A）

economic

B）

competitive

C）

strategic

D）

alloftheabove

Answer:

D

Topic:

OperatingExposure

Skill:

Recognition

2）

Whattypeofinternationalriskexposuremeasuresthechangeinpresentvalueofafirmresultingfromchangesinfutureoperatingcashflowscausedbyanyunexpectedchangeinexchangerates?

A）

transactionexposure

B）

accountingexposure

C）

operatingexposure

D）

translationexposure

Answer:

C

Topic:

OperatingExposure

Skill:

Recognition

3）

Thegoalofoperatingexposureanalysisistoidentifystrategicoperatingtechniquesthefirmmightadopttoenhancevalueinthefaceofunanticipatedexchangeratechanges.

Answer:

TRUE

Topic:

OperatingExposure

Skill:

Conceptual

4）

________cashflowsarisefromintracompanyandintercompanyreceivablesandpaymentswhile________cashflowsarepaymentsfortheuseofloansandequity.

A）

Financing;operating

B）

Operating;financing

C）

Operating;accounting

D）

Accounting;financing

Answer:

B

Topic:

OperatingandFinancialCashFlows

Skill:

Recognition

5）

Operatingcashflowsmayoccurindifferentcurrenciesandatdifferenttimes,butfinancingcashflowsmayoccuronlyinasinglecurrency.

Answer:

FALSE

Topic:

OperatingandFinancialCashFlows

Skill:

Recognition

6）

WhichofthefollowingisNOTanexampleofafinancialcashflow?

A）

parentinvestedequitycapital

B）

interestonintrafirmlending

C）

paymentforgoodsandservices

D）

intrafirmprincipalpayments

Answer:

C

Topic:

FinancialCashFlows

Skill:

Recognition

7）

WhichofthefollowingisNOTanexampleofanoperatingcashflow?

A）

managementfeesanddistributedoverhead

B）

royaltiesandlicensefees

C）

rentandleasepayments

D）

dividendpaidtoparentcompany

Answer:

D

Topic:

OperatingCashFlows

Skill:

Recognition

8）

________exposureisfarmoreimportantforthelong-runhealthofabusinessthanchangescausedby________or________exposure.

A）

Operating;translation;transaction

B）

Transaction;operating;translation

C）

Accounting;translation;transaction

D）

Translation;operating;transaction

Answer:

A

Topic:

Operating;Transaction;andTranslationExposure

Skill:

Conceptual

9）

Expectedchangesinforeignexchangeratesshouldalreadybefactoredintoanticipatedoperatingresultsbymanagementandinvestors.

Answer:

TRUE

Topic:

Expectations

Skill:

Conceptual

10）

Underconditionsofequilibrium,managementwoulduse________exchangerateasanunbiasedpredictoroffuturespotrateswhenpreparingoperatingbudgets.

A）

thecurrentspot

B）

theforwardrate

C）

theblackmarket

D）

noneoftheabove

Answer:

B

Topic:

ForwardRate

Skill:

Conceptual

11）

SimpsonSignCompanybasedinFrostbiteFalls,Minnesotahasa6-monthC$100,000contracttocompletesignworkinWinnipeg,Manitoba,Canada.Thecurrentspotrateis$1.02/C$andtheforwardrateis$1.01/C$.Underconditionsofequilibrium,managementwouldusetoday________whenpreparingoperatingbudgets.

A）

$102,000

B）

$101,000

C）

$100,000

D）

Noneoftheabove

Answer:

B

Topic:

ForwardRate

Skill:

Analytical

12）

Inequilibrium,expectedcashflowtoamortizeinternationaldebtobligationsshouldreflectthe________.

A）

currentspotrate

B）

thespotratewhentheloanwascontracted

C）

theinternationalFishereffect

D）

noneoftheabove

Answer:

C

Topic:

ExchangeRateEquilibrium

Skill:

Conceptual

13）

Fromaninvestor'sperspective,iftheforeignexchangemarketisefficient,informationaboutexpectedchangesinexchangeratesshouldbewidelyknownandthusreflectedinafirm'smarketvalue.Only________inexchangeratesoran________foreignexchangemarket,shouldcausemarketvaluetochange.

A）

expectedchanges;efficient

B）

unexpectedchanges;efficient

C）

expectedchanges;inefficient

D）

unexpectedchanges;inefficient

Answer:

D

Topic:

ExchangeRateEquilibrium

Skill:

Conceptual

14）

WhichofthefollowingisNOTanexampleofdiversifyingoperations?

A）

diversifyingsales

B）

diversifyinglocationofoperations

C）

raisingfundsinmorethanonecountry

D）

sourcingrawmaterialsinmorethanonecountry

Answer:

C

Topic:

ForeignExchangeDiversification

Skill:

Recognition

15）

WhichofthefollowingisNOTanexampleofdiversificationinfinancing?

A）

raisingfundsinmorethanonemarket

B）

raisingfundsinmorethanonecountry

C）

diversifyingsales

D）

Alloftheabovequalify.

Answer:

C

Topic:

ForeignExchangeDiversification

Skill:

Recognition

16）

Managementmustbeabletopredictdisequilibriaininternationalmarketstotakeadvantageofdiversificationstrategies.

Answer:

FALSE

Topic:

ForeignExchangeDiversification

Skill:

Conceptual

17）

Whendisequilibriaininternationalmarketsoccur,managementcantakeadvantageby

A）

doingnothingiftheyarealreadydiversifiedandabletorealizebeneficialportfolioeffects.

B）

recognizingdisequilibriafasterthanpurelydomesticcompetitors.

C）

shiftingoperationaloffinancingactivitiestotakeadvantageofthedisequilibria.

D）

alloftheabove.

Answer:

D

Topic:

ForeignExchangeDiversification

Skill:

Conceptual

18）

PurelydomesticfirmswillbeatadisadvantagetoMNEsintheeventofmarketdisequilibriabecause

A）

domesticfirmslackcomparativedatafromitsownsources.

B）

internationalfirmsarealreadysolarge.

C）

allofthedomesticfirm'srawmaterialsareimported.

D）

Noneoftheabove.Domesticfirmsarenotatadisadvantage.

Answer:

A

Topic:

ForeignExchangeDiversification

Skill:

Conceptual

19）

WhichofthefollowingisprobablyNOTanadvantageofforeignexchangeriskmanagement?

A）

thereductionofthevariabilityofcashflowsduetodomesticbusinesscycles

B）

increasedavailabilityofcapital

C）

reducedcostofcapital

D）

Alloftheabovearepotentialadvantagesofforeignexchangeriskmanagement.

Answer:

D

Topic:

ForeignExchangeDiversification

Skill:

Recognition

20）

WhichofthefollowingisNOTanexampleofaformofpoliticalriskthatmightbeavoidedorreducedbyforeignexchangeriskmanagement?

A）

expropriationofassets

B）

destructionofrawmaterialsthroughnaturaldisaster

C）

war

D）

unfavorablelegalchanges

Answer:

B

Topic:

PoliticalRisk

Skill:

Recognition

21）

WhichofthefollowingisNOTidentifiedbyyourauthorsasaproactivemanagementtechniquetoreduceexposuretoforeignexchangerisk?

A）

matchingcurrencycashflows

B）

currencyswaps

C）

remainingapurelydomesticfirm

D）

parallelloans

Answer:

C

Topic:

ManagementofForeignExchangeRisk

Skill:

Recognition

22）

Whichoneofthefollowingmanagementtechniquesislikelytobestoffsettheriskoflong-runexposuretoreceivablesdenominatedinaparticularforeigncurrency?

A）

borrowmoneyintheforeigncurrencyinquestion

B）

lendmoneyintheforeigncurrencyinquestion

C）

increasesalestothatcountry

D）

increasesalesinthiscountry

Answer:

A

Topic:

ManagementofForeignExchangeRisk

Skill:

Conceptual

23）

Whichoneofthefollowingmanagementtechniquesislikelytobestoffsettheriskoflong-runexposuretopayablesdenominatedinaparticularforeigncurrency?

A）

borrowmoneyintheforeigncurrencyinquestion

B）

lendmoneyintheforeigncurrencyinquestion

C）

relyontheFederalReserveBoardtoenactmonetarypolicyfavorabletoyourexposurerisk

D）

noneoftheabove

Answer:

B

Topic:

ManagementofForeignExchangeRisk

Skill:

Conceptual

24）

Theparticularstrategyoftryingtooffsetstableinflowsofcashfromonecountrywithoutflowsofcashinthesamecurrencyisknownas________.

A）

hedging

B）

diversification

C）

matching

D）

balancing

Answer:

C

Topic:

ManagementofForeignExchangeRisk

Skill:

Recognition

25）

WhichofthefollowingisNOTanacceptablehedgingtechniquetoreduceriskcausedbyarelativelypredictablelong-termforeigncurrencyinflowofJapaneseyen?

A）

ImportrawmaterialsfromJapandenominatedinyentosubstitutefordomesticsuppliers.

B）

Paysuppliersfromothercountriesinyen.

C）

ImportrawmaterialsfromJapandenominatedindollars.

D）

Acquiredebtdenominatedinyen.

Answer:

C

Topic:

ManagementofForeignExchangeRisk

Skill:

Recognition

26）

AnMNEhasacontractforarelativelypredictablelong-terminflowofJapaneseyenthatthefirmchoosestohedgebyseekingoutpotentialsuppliersinJapan.Thishedgingstrategyisreferredtoas________.

A）

anaturalhedge

B）

currency-switching

C）

matching

D）

diversification

Answer:

A

Topic:

NaturalHedge

Skill:

Recognition

27）

AnMNEhasacontractforarelativelypredictablelong-terminflowofJapaneseyenthatthefirmchoosestohedgebypayingforimportsfromCanadainJapaneseyen.Thishedgingstrateg